Shilling hits 3-year low, to weaken to Sh96.5 mark

The shilling weakened yesterday, with banks covering short dollar positions. The traders said they expected the local unit to ease even further.

Banks quoted the shilling at Sh95.80/90 to the dollar, a new low last seen in November 2011, compared with Friday’s close of Sh95.40/50. “Banks are covering short positions that they accumulated over the weekend. It’s trading with caution,” Chris Muiga, a senior trader at National Bank of Kenya said, noting that banks were buying dollars in anticipation that the shilling could weaken further. “The shilling’s outlook still remains bleak, with the likelihood of the dollar or shilling pair breaching the key Sh96 mark during the week,” Commercial Bank of Africa said in its daily market report.

The shilling has been under pressure in recent weeks due to falling revenues from tourism and horticulture - leading sources of foreign exchange and by concerns about a rising import bill. Traders said they forecast the shilling, which has lost 5.3 per cent to the dollar this year, to trade in the Sh95.50 to Sh96.50 range in the next few days. Technical analysis of the 14-day and 50-day weighted moving averages suggested the shilling would stay on a weakening trend in the near term. The Central Bank planned to mop up Sh13 billion in excess liquidity.